TaxTMI 
TaxTMI 
2019 (11) TMI 278
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 2017 (in short Act) and is a company providing Information Technology enabled services to customers worldwide. It has eight (8) units registered under the Act, five (5) units registered in Special Economic Zones (SEZ), two (2) units in Software Technology Parks of India (STPI) and one (1) unit in a Domestic Tariff Area (DTA). 3.In the era prior to levy of goods and service tax (in short GST) the petitioner was assessed to service tax and was availing CENVAT credit on inputs, capital goods and input services, utilizing the same against payment of service tax liability. 4. Vide Finance Act 2004, Parliament introduced the levy of Education Cess and, vide Finance Act 2007, the levy of Secondary and Higher Education Cess. The CENVAT Credit Rules 2004, (in short Rules) enabled a manufacturer of final products or a provider of output services to avail CENVAT credit in respect of EC and SHEC against duty levied on excisable goods or taxable services in terms of Rules 3(1)(vi), (via), (x) and (x-a) thereof. The Rules specifically provided that once availed, the utilization thereof shall be only as against payment of EC or SHEC respectively. 5. While this was so, the levy of EC a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit [of eligible duties] carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely:- (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. (2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed. (4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 (1 of 1944) or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, (32 of 1994), but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger,- (a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of sub-section (1); and (b) the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the provisions of sub-section (3). (5) A registered person shall be entitled to take, in his electronic credit ledger, credit of eligible duties and taxes in respect of inputs or input services received on or after the appointed day ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inted day in such manner as may be prescribed: Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier: Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act: Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralised registration was obtained under the existing law. (9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to non-payment of the consideration within a period of three months, such credit can be reclaimed subject to the condition that the registered person has made the payment of the consideration for that supply of services within a period of three months from the appointed day. (10)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 1 or Explanation 2 and any cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975 (51 of 1975).] 10.The scheme of transition of credit as set out under the Act has been referred to by both Mr.Raghavan Ramabadran, learned counsel appearing for the petitioner as well as Ms.Aparna Nandakumar, learned counsel appearing for the Revenue, in some detail. 11. In the present case, the petitioner followed the procedure for carrying forward CENVAT credit availed under the erstwhile regime, set out in terms of Rule 117 of the Central Goods and Service Tax (CGST) Rules, 2017 (in short Rules). The Rules provide that every person entitled to input tax credit under Section 140 shall submit a declaration electronically in Form GST Tran-1 within 90 days of the appointed date, being 01.07.2017, for carrying forward such credit to be utilised against turnover from taxable services. The petitioner had a closing balance of a total of Rs. 18,80,85,930/- comprising, credit availed on input services directly of an amount of Rs. 17,77,77,224/-, EC of an amount of Rs. 55,84,569/- and SHEC of an amount of Rs. 29,99,337/-. This is t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ercial Tax Officer, Pali ((2018) 14 GSTL 497) (6) Commissioner of Central Excise, Bhopal v. Minwool Rock Fibres Ltd ((2012) 278 ELT 581) 16. A counter has been filed by the Revenue reiterating the rationale of the impugned order and stating that the claims of the petitioner for transition of EC, SHEC and KKC are not tenable in law. The Revenue points out that though the right to input tax credit is a statutory right it may not be claimed by the assessee as a vested right and it is only when all conditions under statute are complied with in full that the petitioner may claim utilisation of ITC. 17. In the present case, the scheme of Section 140 nowhere provides for utilisation of EC, SHEC and KKC. The learned counsel for the Revenue points out that with the abolishing of EC, SHEC and KKC in 2015 and 2016 respectively, the levy as well as availment of credit in regard to the aforesaid cesses has been removed from the sweep of the Act. To a pointed query from the Bench as to why the assessee was permitted to carry forward the credit manually in CENVAT register, the Revenue would only state, while admitting the aforesaid as a fact, that that by itself would not be a dete....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd cesses, Value Added Tax, Central Sales Tax, Entry Tax, Luxury Tax, Taxes on lottery, Entertainment Tax, Purchase Tax, State Excise Duties, Stamp Duty, Taxes on vehicles, Tax on goods and passengers, Taxes and duties on electricity as well as service tax. While integrating the taxes, the intention of the Government was evidently to provide a seamless model for transitioning of all credits hitherto availed of by an assessee under the erstwhile VAT and other indirect tax levies to the Goods and Service Tax regime as well. The benefits that had been made available and that had been permitted to continue in the erstwhile taxing regime were thus meant to be continued. 20. EC was introduced in 2004, SHEC in 2007 and KK Cess in 2016. Upon introduction of the levy of EC in 2004, Section 95 of Finance Act, 2004 provided that EC would be levied in addition to service tax on taxable services and could be availed of and utilised against payment of EC alone. Likewise for SHEC, introduced in 2007, it was made clear that the benefits of SHEC on input were available to be utilised only as against the respective payments alone and not on the payment of excise duty or service tax on manufacture....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... about the periodic lapse of balance credit. This resulted in accumulation of credit in many cases. W.e.f. 1-4-2008, under the amended rule 6(3), the following options are available to the taxpayers not maintaining separate accounts; (i) Option No.1 - In respect of exempted goods, he may pay an amount equal to 10% of the value of exempted goods; and in respect of exempted/non-taxable services, he may pay an amount equal to 8% of the value of such exempted/non-taxable service; OR (ii) Option No.2 - He may pay an amount equivalent to Cenvat credit attributable to inputs and input services attributable to exempted goods and non-taxable/exempted services. As stated earlier, may taxpayers had accumulated Cenvat credit balance as on 1-4-2008. The matter to be considered was whether this credit balance should be allowed to be utilized for payment of service tax after 1-4-2008. As no lapsing provision was incorporated and that the existing Rule 6(3) of the Cenvat Credit Rules does not explicitly bar the utilization of the accumulated credit, the department should not deny the utilization of such accumulated Cenvat credit by the taxpayer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y by the assessee. Thus, altering a scheme of credit would affect the rights of the assessee. The impugned Rule was thus quashed, the Bench stating that it cannot be applied to goods manufactured prior to 16.03.1995, where duty payment stood discharged and credit available for further manufacture. 27. The relevant observations are extracted hereunder: '5. ....... As pointed out by us that when on the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that right, which had accrued to a party such as availability of a scheme is affected and, in particular, it loses sight of the fact that provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assesses concerned. ..... 6.We may look at the matter from another angle. If on the inputs the assessee had already paid the taxes on the basis that when the goods are uti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and even finished products was available, but not in respect of the sold products. This was clearly taking away a vested right in the form of an amendment to the Rule. There was lapse of credit, which could not be utilized, though the tax/duty had not been withdrawn. The Supreme Court noticed that the credit attributable to inputs had already been used in manufacture of final products that had been cleared, and this alone was sought to be lapsed, notwithstanding the fact that the right had become absolute. On a holistic reading of the entire scheme, it was observed that when acts have been done by the parties concerned on the strength of the Rules, incidence following thereto must take place in accordance with the scheme or the Rules, otherwise it would affect the rights of the assessees. Further, right had accrued on the date when the assessee had paid tax on the raw materials or inputs and the same would continue till the facility available thereto got worked out or until the goods existed. As noticed above, tax/duty had not been withdrawn. Lastly and more importantly, Section 37 of the Central Excise Tariff Act, 1985 did not enable the authorities to make the Rule impu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt was that a vested right to avail the benefit of unutilised EC or SHEC credit was available as on 01.03.2015 and 01.06.2015 as against payment of tax on excisable goods and services. Simultaneous therewith the petitioners also challenged Instruction dated 07.12.2015 that provided as follows: B.21 - Hyderabad, Coimbatore, Vadodara, Vishakhapatnam, Delhi Zone- Cenvat Credit - Balance of Education Cess and Secondary & Higher Education Cess lying in the CENVAT Credit Account: Issue: Exemption from levy of Education Cess and Secondary & Higher Education Cess has been provided w.e.f. 01.03.2015 vide notification no. 14/2015-CE & 15/2015-CE both dated 01.03.2015, Sub-rule 7(b) of Rule 3 of CENVAT Credit Rules, 2004, specifies that CENVAT credit of specified duties shall be utilized for payment of those specified duties only. CENVAT Credit of Education Cess and Secondary & Higher Education Cess can be utilized only for payment of Education Cess and Secondary & Higher Education Cess, respectively. Consequent upon grant of exemption there is issue of utilization of the accumulated credit of the past. It is suggested that an amendment to sub-rule 7(b) of Rule 3 of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Legislation. 33. In summary, the Division Bench rejected the prayer of the petitioners to quash notification dated 29.10.2015 denying them the direction sought. 34. I have carefully read the aforesaid decision relied upon by the Revenue. The decision and the observations made therein have to be seen in the context of the prayer advanced in that case and in the light of the statutory provisions/rules existing at the relevant point in time. 35. Firstly, the Instructions issued by the Central Board of Excise and Customs dated 07.12.2015, reveal a policy decision, not to allow utilisation of accumulated credit of EC and SHEC, but nowhere states that the credit has lapsed. The Board only says that the cesses have been phased out and since there is no new liability to pay these cesses, no vested right can be said to exist in relation to the past accumulated credit in the light of Rule 3(7)(b) of the Cenvat Credit Rules, 2004 which stipulates that Cenvat Credit shall be utilised only as against payment of specified duties. The request of the petitioner in that case has to be seen in this perspective and specifically in the light of the embargo placed by Rule 3(7)(b) as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e as well as liabilities imposed by a taxing Statute at any given point in time. The credit available in regard to EC, SHEC and KKC are no different. In strategising and conducting its business, the assessee would certainly have taken into account that credit was available for set-off against output tax liability. Such credit accumulated has not been stated to have lapsed. The impugned action of the assessing authority in rejecting the claim has however the consequence of insertion of a Rule/Regulation to this effect, which, in my view, is impermissible. 42. A fiscal statute has to be read and understood, as seen. The interpretation should be on the basis of what is apparent, apart from being strict. These are settled principles that need no reiteration, nor support of case law. If one were to apply these propositions to the case on hand, the provisions of section 140(1) provide for the transfer of all credits and levies, barring those set out in the proviso, which is, (i) where the said amount of credit is inadmissible as ITC (ii) where an assessee has not furnished returns required under the existing law for six preceding months or (iii) where the said credit relates to goo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f six months had expired on 20.11.1999 and 10.12.1999 respectively, whereas, the claims had been filed only on 28.12.1999. The provisions of amended 11B were held not to be applicable to revive a claim that was already beyond time. The Bench noted that the amendment would ordinarily be retrospective in nature. Thus the benefit of one year for filing claim for rebate would be available from 12.05.2000 when the limitation was extended from six months to 12 months. Moreover, the proviso had been added in the section itself to the effect that the amended provision would not have the effect of bringing to life a dead claim. 46. The judgments in the case of S.S.Gadgil V. Lal and Co. (AIR 1965 SC 171), J.P.Jani, Income Tax Officer V. Induprasad Devshanker Bhatt (AIR 1969 SC 778), New India Insurance Co. Ltd. V. Shanti Misra ((1975) 2 SCC 840, T.Kaliamurthi V. Five Gori Thaikkal Wakf ((2008) 9 SCC 306), Thirumalai Chemicals Ltd. V. Union of India ((2011) 6 SCC 739 and Mafatlal Industries Ltd. V. Union of India ((1997) 5 SCC 536 were cited by the Supreme Court in allowing the Revenues' appeal and holding that a dead claim could not be revived by a subsequent benefit. 47. Thus the Reve....